Withdrawal rates - theory vs practice

[thebacchus]

We include home equity in Net Worth calculations. (Generally put together for business/investment loans for our businesses)

When calculating income producing assets on which we could base our income/survival, we exclude our home.

Our theory is that unless you are willing to sell your home and live off of the proceeds, it is an expense, not an income producing asset.

-TheBacchus

Hello Cut-Throat. Amusing tho it was, I see one flaw in your point about "everyone having a story about how great real estate is"
and comparing that to a Microsoft investment
(at the right time) "blowing your eyes out". And, of course there are other "Microsoft-like" situations out there
all the time if we could only recognize them. However,
in real estate you can literally finance your entire ER,
by yourself, with no money, and do it in your own neighborhood in many cases. You don't need to pick the
next Microsoft. You only need brains and guts.

JG

[thebacchus]

I think the asset versus expense argument would definately be different for each of us, especially the liberals among us.

We also have quite a bit of residential & commercial real estate experience. I try to keep it simple and have two sides to the equation, one is the side that produces the income (business & investments) and the other is that which taketh away (expenses). Hopefully we can keep the scales tilted in the right direction!

I agree there definately is some value in the asset as our expenses would also definately be higher if we did not own our house as well, although the disparity would not be as large as yours. Our costs for maintenance/taxes, etc. are around $300-450/mo and the rental of a like property would be approx. $1,500-$1,800. (I don't include utilities as you would have those whether you owned or rented.)

So I guess you could look at it that it produces a "phantom" income of sorts in the way of the savings by owning outright versus renting and the "phantom" expense might be the opportunity cost of not have the equity invested in an income producing asset.

The savings difference could probably also be divided into the equity amount to give you an "Equity rate of return??" Could be an interesting comparison if the $$'s are producing a higher or lower rate of return than if you invested the equity in another type of investment.

-TheBacchus

I modified the original retire early spreadsheet to allow for a withdrawal growth factor above and beyond inflation. If anybody wants a copy please email me at mike_91361 @ yahoo.com.

I figure about 2% above inflation should keep up with wages, but if anybody has long-term figures I'd be interested. I'm planning on 50 yrs of retirement and the idea of a living 1950s lifestyle today doesn't seem too much like fun. Sure they had jet airplanes, but it wasn't a realistic mode of travel for the average wage earner.

Hey mike, after 40-50 years of retirement, you won't want to ride on a Jet Airplane!

The rocker may even be too exciting by then.

Maybe they'll have transporters like in Star Trek I'd sure hate to be stuck with on a plane because I couldn't afford to pay Scotty to beam me up.

[Zipper]

Scotty and Bones died years ago.

And Spock looks like he should be in a coffin.

On the other hand, Captain Kirk is still goin' strong.

[larry]

Scotty hasn't died yet! Although James Doohan has been recently diagnosed with Ahlzeimers, he is still very much alive.
Beam me up.

[MJ]

Scotty and Bones died years ago.

Don't bury Scotty (James Doohan) yet because he is still alive although he may not still be kicking as much.

[larry]

but he is correct about Nimoy, he does look like he's pre-prepped for the ol' pine box. All those years of being logical and no time for fun I guess!

Kinda like ER, sometimes you can't be too logical about it all, gotta let go a few times and party with the Klingons!

Does anyone else think that William Shatner is starting to look like Albert Finney?

JG

[larry]

Shatner seems like he's really making a career comeback (from what I'm not sure) but he's really been present on my tv screen lately.

[Bob_Smith]

Does anyone else think that William Shatner is starting to look like Albert Finney?

JG

Yes!

[Tadpole]

The devolution of a finance thread. Love it. Just saw a series rerun. They all look fine to me. I think maybe it was one of those back in time to 20th century America episodes that aged them.

To be serious for a moment - Does anybody know how much wages have outpaced inflation historically?

[sgeeeee]

To be serious for a moment - Does anybody know how much wages have outpaced inflation historically?

Hi Mike,

I'm sure I've found a better source for this information on the social security administration site in the past, but I must be searching in the wrong places tonight. I did find some relevant data:

http://www.ssa.gov/OACT/TR/TR99/triid.html#18769

Look at Table II.D1 columns 3 and 4.

[Hyperborea]

There's also this document - http://emlab.berkeley.edu/users/saez...aezOUP04US.pdf

I haven't read the whole thing but look at the graph on page 60 for a nice summary of average real income versus CPI from 1913 to 1998.